Japan’s heated tobacco market is becoming increasingly competitive — who will become the leader in t

Is the e-cigarette war in Japan a trend of Japan deviating from global trends?

When it comes to Japan's "Galapagos", people generally do not have a good impression.

Note: (Galapagos refers to the phenomenon where products in the Japanese market undergo "optimization" independently, losing interchangeability with products from outside the region, ultimately facing the danger of being eliminated by foreign products that are more adaptable and resilient.)

From the 1990s to the early 2000s, Japanese mobile phones had a high cost-performance ratio globally and held a complete advantage in the world market. However, when smartphones led by the Apple iPhone entered Japan, the "Galapagos" mobile phones were eliminated. This is a typical example of the Galapagos phenomenon.

In Japan, new "Galapagos" products frequently appear. Heated tobacco e-cigarettes are one of them. PLOOM, IQOS, and GLO have formed a "three kingdoms" situation, engaging in fierce competition. Recent news has mentioned that heated tobacco e-cigarettes are very popular, but only in Japan.

Will heated tobacco e-cigarettes share the same fate as Galapagos products?

Firstly, Japanese e-cigarette manufacturers differ from the Japanese mobile phone market. IQOS is a product under Philip Morris International, an American company. GLO is a product of British American Tobacco (BAT) and overseas manufacturers. In contrast, PLM is a new product from Japan's JT.

This is not just a reason for foreign companies to enter the Japanese market. Rather than saying this is Japan's Galapagos phenomenon, it is more accurate to say it is a test marketing market for entering the global market. Currently, the global cigarette market is undergoing a transition, and new types of tobacco that replace traditional cigarettes are gaining attention. One of them is the heated tobacco e-cigarettes that are gradually becoming popular in Japan, and various companies are using Japan as a launch market to gradually expand their offensive worldwide.

Nomura Securities analysts stated: Since IQOS was launched in Japan in 2014, PMI initially intended it as a test market. Although it exceeded expectations in sales, supply issues for the devices have also arisen.

The difference between e-cigarettes and heated tobacco e-cigarettes

The so-called new type of tobacco can be divided into two categories. One is mainstream in Europe and America, which does not contain tobacco but contains nicotine e-liquid, producing vapor when heated. In English, it is referred to as E-cigarette, E-vapor, vape, etc., while in Japanese, it is also called "電子煙" (e-cigarette) (however, heated tobacco e-cigarettes are also referred to as "電子煙").

A report from a large accounting firm in London shows that the e-cigarette market is growing rapidly, with a survey conducted in seven countries (the UK, Germany, France, Italy, Poland, Russia, and South Korea) showing an 86% increase in users from 2013 to 2015. It is estimated that the global market will reach $12 billion by 2017.

The other type of new tobacco is heated tobacco e-cigarettes. They use tobacco leaves without burning, allowing enjoyment of vapor produced by heating. In English, they are referred to as t-vapor, heat-not-burn tobacco, etc. The global market size is about $5 billion (around 2017), with 90% of it being in Japan.

In Japan, nicotine is designated as a pharmaceutical ingredient and requires approval from the Ministry of Health, Labour and Welfare. While nicotine e-liquid can be used, it cannot actually be sold, which has led to the popularity of heated tobacco e-cigarettes.

Nomura Securities predicts that in 2017, heated tobacco e-cigarettes will account for 12% of the Japanese cigarette market, but by 2018, this figure will grow to around 24%, and it is expected to reach about 29% by 2019. The rapid popularity is mainly due to the necessity of choosing e-cigarettes. Mr. Fujiwara stated, "The reason heated tobacco e-cigarettes have been successful so far is that they have a mild flavor and secondhand smoke does not cause much trouble for those around. This is part of the Japanese national character, which enjoys new things." #p#分页标题#e#

In summary, the transition from traditional cigarettes to e-cigarettes is a global trend, forming two factions.

Because many smokers do not feel fully satisfied when using nicotine e-liquid, heated tobacco e-cigarettes were developed. High expectations may also bring heated tobacco e-cigarettes closer to current cigarettes. According to a market survey by Euromonitor International, in the next two years, the growth rate of heated tobacco e-cigarettes will be higher than that of e-cigarettes.

In fact, the global market expansion has already begun. Last year, JT launched PLM in Switzerland, which has similar regulations to Japan but lacks an e-cigarette market. Additionally, IQOS has been sold in 25 countries and was launched in South Korea last year, with the number of e-cigarette users continuously increasing.

The key to competition for market share lies in how to attract the middle-aged and elderly demographic.

Mr. Fujiwara from Nomura Securities stated, "Heated tobacco e-cigarettes do not have the same flavor as traditional cigarettes, and as electronic devices, they are prone to damage, so people often switch between different brands. This behavior of consumers switching brands will directly affect changes in market share. The battle for market share will become more intense in the future. Although IQOS is currently in first place, anyone can become the market leader."

"In the future, the key to mastering market share will be how to attract the middle-aged demographic. Currently, 40% of smokers are around 50 years old. They find it difficult to switch to heated tobacco e-cigarettes. However, I also expect JT to leverage its strong capabilities." Mr. Fujiwara said.

Regarding how to capture the middle-aged demographic, JT has its own insights at the operational level. Their devices do not require time for cleaning, can be used immediately without waiting, and can be conveniently stored in pockets, making them the easiest to operate among the three types of heated tobacco e-cigarettes.

JT is expected to release new products with high-temperature heating methods similar to IQOS and GLO, as well as an upgraded version of PLM within the year. The competition in Japan's heated tobacco e-cigarette market is becoming increasingly fierce. Who can become the leader in Japan's heated tobacco e-cigarette market will also mean being able to balance the global e-cigarette market, which is not an exaggeration to say.